Hongkong & Shanghai Hotels, owner of the Peninsula Hotel, is taking advantage of a 23 per cent rise in its share price so far this year by seeking to raise $1.18 billion in a one-for-12 rights issue. The company will use the proceeds to renovate its existing hotels, reduce debt, increase working capital and 'finance new investments and acquisitions', it said. Analysts described the decision to use a rights issue instead of share placement as 'an unusual move' but said the continuing bull market had made such issues increasingly popular. Under the terms of the issue, shareholders will be permitted to buy one new share for every 12 shares they hold for $13.10 each, a discount of five per cent to yesterday's close of $13.85. Hongkong & Shanghai will also issue one call warrant for every share held, giving investors the right to buy the company's shares at $13.80 each. The warrants expire in October 1998. Brokers said the decision to use a rights issue would expose shareholders to minimal dilution. 'It should do not much harm to shareholders if they don't take the rights shares. They only have to buy a rights share for every 12 shares they hold,' Kent Rossiter, senior institutional sales manager of Nikko Securities, said. The issue is being underwritten by Schroders Asia, HSBC Investment Bank Asia and BZW Asia. A company associated with trusts which hold 58.8 per cent of Hong Kong & Shanghai's capital, and of which Michael Kadoorie and Ronald James McAulay are beneficiaries, will take up an entitlement relating to 119.2 million of the 634.66 million shares held by the trusts. Chief executive Pierre Boppe said the fund raising exercise was needed as the company had to meet on-going investments projects and more projects were being negotiated. He said it would boost the company's debt-raising capacity, creating a platform for future expansion.